Government-backed loan

A government-backed loan is a loan subsidized by the government, which protects lenders against defaults on payments, thus making it a lot easier for lenders to offer potential borrowers lower interest rates. Its primary aim is to make home ownership affordable to lower income households and first-time buyers.

There are numerous types of government-backed loans, which vary dependent on the country and status of the borrower. Arguably, the most widely known type of government-backed loan is the US Federal Housing AdministrationFHA loan, in existence since 1934.